The Debt Snowball Method: How It Works And How To Use It

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If you are currently struggling to get out of debt, you need to employ the best strategy to complete your payments as soon as possible. The earlier you clear your debt, the easier it is to focus on other financial goals and plan for a successful retirement. The debt snowball method is one of the best-known strategies for attaining a debt-free life.

In this post, you will learn how to practically apply this strategy to your debt problem and be financially free. Mind you; this is not some random technique with a poor success rate. The debt snowball method has helped millions of people pay their debts, and if you correctly apply it to your financial situation, you will get favorable results.


What Is A Debt Snowball?

A debt snowball actually refers to one of the multiple debts you owe. By rolling each snowball, you are gradually paying your debts one after the other. It’s all about taking one step at a time and remaining consistent until you completely pay off the debts.


How The Debt Snowball Method Works?

As kids growing up around snow, we understand that the fastest or simplest way to build a snowman is by rolling a chunk of snow into a tight ball and spinning it around the yard. As we roll this ball of snow on the icy floor, it gradually becomes bigger and eventually grows into a snow boulder.

By theoretically applying this method to one’s debt repayment process, one can be debt-free for good. It simply works by paying off debt in order of smallest to largest. The moment you knock out a balance, you move to the next one. You are supposed to repeat this process until you have cleared up all your outstanding debt.

One of the main reasons why the debt snowball strategy is often recommended is that it’s suitable for almost any financial situation. Whether you have a high-paying job or not, paying your debt bit by bit makes the process feasible. Although it may take a while, you will clear your debts eventually.

debt snowball method


How Do You Use The Debt Snowball Method?

The debt snowball method is pretty straightforward and easy to implement. Here are the 4 basic steps on how to use it:


Step 1: Create A List Of All Your Debts

Listing all your debts is the ideal way to begin with this strategy. You are expected to take a pen and paper to literally write out the balances in a particular order: from the smallest to the largest. This gives you a clear perspective of what you owe.

It’s also a way of measuring the debt with your current cash flow. Of course, the debt is much bigger than your paycheck. But the thing is seeing how feasible it is to pay off the debts with your current salary. If you think you aren’t earning enough, you might want to get a side hustle to pull this off.


Step 2: Make Minimum Payments On All Your Debts

Having created a list of your debts, the next important step is to make the minimum payment on each of the balances. The minimum of payments is the amount you need to pay every month to prevent late fees and other credit issues.

At this point, it’s highly recommended to avoid taking on any new loan. Until you finish paying off your existing debts completely, you should remain very cautious about borrowing money and using credit cards.


Step 3: Pay As Much As You Can On Your Smallest Debt

Clearing your smallest debt should be a priority. All extra cash should be directed toward paying the debt with the smallest balance first. By the time you complete the first payment, quickly move to the next balance. Don’t just pay the minimum balance. If you can realize extra money, increase your debt payment to make the process faster.

Mind you, your largest debt is the last thing you are supposed to tackle. You have to follow this procedure to reduce the pressure and financial stress that comes with debt repayment.


Step 4: Repeat The Process Until You’re Debt Free

One of the habits you must adopt when using the debt snowball method is “consistency”. What this means is that you shouldn’t relax after clearing one balance. You have to maintain momentum by repeating the same process. As soon as you finish paying off a debt, tackle the next one.

As you’d probably expect, this is obviously not easy to execute, but you don’t have much choice. It’s one of the reliable ways to become debt-free as time passes.


An Example Of The Debt Snowball

Seeing a practical example (with numbers) of the debt snowball method would help you understand it much better.

Using the table below, let’s assume you have 5 debts:

debt snowball method for paying off debt

Now that you have a list of all your debts, you are expected to follow these steps:

  1. Make the minimum payment for all five debts at once.
  2. If you have extra cash after the payments, put the money toward debt A.
  3. If you finish paying off debt A, all the money that was supposed to go toward debt A can now be directed toward debt B.
  4. When you complete debt B, all the money you used to spend on B should now be paid to debt C balance.
  5. Complete debt C payment. Put all the money you were spending on debt C toward paying off debt D.
  6. By the time you complete debt D payment, focus on paying off debt E with the free financial resources you have.
  7. As soon as you finish paying off debt E, you are done. You are now debt-free.


According to this debt snowball example, you are spending at least $740 a month toward minimum payments. If you have an extra $50 to spare after making the minimum payments, that money should be put toward the smallest debt.

One thing to keep in mind is that as soon as you start using the debt snowball method, you are spending a lot of money every month. This is because you still have to cover your fixed and variable expenses. If your paycheck doesn’t seem enough to cover your debt payments and bills, there’s one simple solution: get more money.

You may have to work multiple jobs or begin a side business to stay on track. However, as you finish paying each debt, the situation could get easier. For example, by the time you finish paying your smallest debt of $200, it means you have extra money the following month to spread across the remaining debts.

As long as you aren’t using credit cards or accepting any new loans, this is very possible. The snowball method only works when you aren’t incurring any more debts in addition to your existing balance.


The Pros And Cons Of Using The Debt Snowball Method

Before you go ahead to use this strategy, it’s important you observe both sides of the coin. That is, knowing why it’s a great method and also why some people may not think it’s the best idea. Here are the pros and cons of the debt snowball method for paying off debt.


  • Pay Your First Debt Early

The joy satisfaction and sense of fulfillment that come with paying your first debt early can be a great feeling. By starting with the smallest balance, you will pay off that particular debt in time. It’s like completing a chapter and seeing how far you’ve come. It gives you some hope that you will be able to complete the entire payment eventually.

Depending on how much your smallest debt is, you will spend only a few months clearing it. If it’s below $500 and your minimum monthly payment is around $75, you will pay this off pretty early. Besides, you are also paying other balances simultaneously.


  • Self-Motivating

One of the main advantages of using the debt snowball method is the psychological boost you get as you progress. When you begin to see your debts being paid off, it motivates and encourages you to keep going. It also boosts your self-confidence, knowing you won’t be trapped in your debt forever.

If you used to be overwhelmed by your financial situation, that could change. The self-motivation derived from paying each balance is enough to keep you on your feet until you are debt-free.

Moreover, applying this strategy can help you become a better manager of your finances. This is because you have to curb your spending in order to meet up with your minimum payments.



  • Expensive

There’s no denying that you would be spending a lot of money every month when using the debt snowball strategy. By paying all your minimum balances at the end of the month, you will certainly spend a substantial amount of money from your paycheck.

Another thing you must bear in mind is that you will be paying more money in interest. Since this method focuses on paying off the smallest balance first rather than the balance with the highest interest rate, your most costly debt would be the last thing you pay.

If you are concerned about spending more money on interest, you may want to consider another debt-repayment method. Also, debt consolidation might be the best decision for you.


  • Takes Time

Another downside to this strategy is that it takes time. As much as you want to pay your debts as soon as possible, you can’t clear your balances overnight. Mind you; this depends on how much debt you have piled up. Someone owing $50,000 would obviously spend more time repaying than someone owing $25,000.

Nevertheless, the number of months or years you spend clearing your debt may not be an issue. As long as you can pay your minimum balances every month, it’s just a matter of time before you become debt-free. Besides, it’s better to pay off your debt gradually so you don’t feel overwhelmed by all the multiple payments.


Who Is The Debt Snowball Method For?

The debt snowball method is meant for anyone. But if we are to be quite specific, it’s safe to say that the strategy should be employed only by people with multiple debts to pay off.

For example, if you have credit card debt, student loans, mortgage, and car alone, then the snowball method is actually perfect for you. Instead of getting frustrated and thinking about how to clear all the debts at once, you should resort to this fantastic debt-repayment strategy. It allows you to reduce your debts by paying off each balance gradually until you aren’t owing a penny.

On the other hand, using this strategy to pay off your debt means you must have a stable source of income. It could be a good-paying job or a scalable business. Basically, you have to keep earning money every month to fulfill your obligations. For every month you fail to make your minimum payments, you will incur late fees.

Moreover, to implement this strategy successfully, one of the main debt snowball tips to help you is to be mindful of your living costs. Spending money moderately and living below your means will help you achieve this financial goal faster. You might also want to ditch your credit cards for good and focus on using a debit card or physical cash instead.


Final Notes On The Debt Snowball Method

The debt snowball method is often confused with other debt-repayment methods such as the debt avalanche method or the debt stacking method. However, the snowball method employs a different approach to paying off debt. Unlike the debt avalanche method, you don’t have to pay off debts with the highest interest rates first.

The snowball strategy encourages you to begin with the smallest amount owed. As you keep up with the repayment schedule, paying off the debts becomes relatively easy.


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Author: Anthony Ihz

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